Quicktakes - The month's trends in a glance - February 2004

Wall Street staggered through the month of February, unable to latch on to a direction amid a dearth of useful economic information. …The Nasdaq composite index finished its sixth down week in a row Friday, and continual selling pressure held the Dow Jones industrial average and Standard & Poor's 500 to minimal gains for the month. Meg Richards, Associated Press, Yahoo! Business, 2-28-04

The Dow Jones industrials…finishing at 10,583.92…up 0.9 percent for the month. The Standard & Poor's 500 index….to 1,144.94…was up 1.2 percent for the month. The Nasdaq…closing Friday at 2,029.82, and ending the month down 1.8 percent. Meg Richards, Associated Press, Yahoo! Business, 2-28-04

American motorists may face a second summer of record gasoline prices, as crude oil costs soar and refineries cope with new environmental rules that complicate motor-fuel production, the U.S. Energy Department said. Oil prices have jumped 20 percent over the past three months as inventories hovered around 28-year lows. Bruce Blythe, Bloomberg News, Oakland Tribune, 2-28-04

This is a presidential election year and the campaign will affect all of us in one way or another. Certainly the candidates will be pandering to various special interest groups and some gaming issues will be in the mix, especially Indian gaming and tribal sovereignty in general. Closer to home, and certain to have a greater and stronger impact, is the expansion legislation that is being discussed in some state legislatures. There wasn't a definite change in February, but in several states legislation has moved closer to resolution. Iowa, Nebraska, Maryland, Maine, Oklahoma, Alabama, Kentucky, Tennessee, Texas, and Pennsylvania are among the states debating gaming; Illinois and Indiana are in the process of awarding additional casino licenses. Each state has its own unique conditions and success or failure will depend on those conditions. Investors, operators and other interested parties can only watch and keep an eye out for opportunities or threats.

A bill to authorize 15,500 slots machines at up to six locations in Maryland passed the state Senate on Friday and headed to an uncertain future in the House of Delegates. The heavily amended version of Gov. Robert Ehrlich's slot machine bill was approved on a 27-18 roll call after about an hour of debate. Baltimore Sun, 2-27-04

A regulation and profit distribution plan approved Thursday for the state's first track-and-casino [Maine] franchise…amended version of LD 1820…lawmakers on the Legal and Veterans Affairs Committee voted 10-3 to approve the bill, the revenue distribution system returned only 61 percent to the slots developer. Bangor News, 2-27-04

Oklahoma horse racing tracks will be allowed to have the same electronic gaming Indian casinos have as a result of a bill passed on Thursday by the Oklahoma House of Representatives. The measure, which passed Senate Bill 553 by a 52-47 vote, also would raise approximately $71-million for education. Thoroughbred News, 2-27-04

The gaming industry has barely had time to digest the implications of Harrah's buying Horseshoe Gaming and then the Las Vegas Binion's Horseshoe and the implications of that merger, when a new, and nearly as large transaction is announced. Boyd Gaming officially declared that it did not wish to be left behind in the group of mid-cap, mid-sized, middle of the pack casinos; with the purchase Boyd declared itself to be one of the big five and a force to be reckoned with…. It is difficult to say what impact these mega-mergers will have, but it is possible to say that the mega-companies will control the growth in established markets and have the best chance of being awarded licenses in any new market.

Boyd Gaming Corp. and Coast Casinos Inc. today announced a merger agreement worth $1.3 billion that is expected to strengthen the companies' presence in the lucrative Las Vegas locals casino market. The deal also brings together two executives from pioneering families whose fathers were casino partners about 40 years ago. …Coast shareholders will receive about $495 million in cash and Boyd will issue about 19.4 million shares worth about $325 million to Coast shareholders. In addition, Boyd will assume about $460 million of Coast debt. …The combination will create a family of 17 casinos and a combined 25,500 employees, including Coast's 7,500 or so employees and Boyd's staff of about 18,000 nationwide. Boyd's Sam's Town on Boulder Highway will join Coast Casino's three local properties, Gold Coast, Suncoast and the recently expanded Orleans, to "create a significant presence in the dynamic growing Las Vegas locals sector," the companies said. Coast isn't a player downtown, where Boyd is a big operator. Liz Benston, Las Vegas Sun, 2-9-04

The stock market usually rewards companies that manage their core businesses well, and, of course, those that expand into new markets or industries or those involved in mergers and acquisitions. Boyd is being rewarded for its management of the Boyd properties, and one would guess in time for the Coast acquisition. Steve Wynn continues to dazzle even without an operating property, and yet the market rewards him; Mr. Wynn has always been in a category by himself.

The average value of gaming stocks soared to new records in February, up 76 percent from a year earlier, despite marked weaknesses in slot machine manufacturers' shares, analysts said Friday. Station Casinos and Boyd Gaming Corp. led local operators because of their aggressive strategies aimed at the locals market, analysts said. Rod Smith, Gaming Wire, Las Vegas Review-Journal, 2-28-04

Wynn Resorts topped off twice this week: It poured the top slab on its signature Las Vegas resort and its stock continued its remarkable climb with share price increases leading all other major gaming companies. Despite having neither cash flow nor operating income, and with more than a year to go before its Las Vegas property even opens, shares closed Friday at $36.34, up about 180 percent since Las Vegas developer Steve Wynn took his company public on Oct. 25, 2002. Rod Smith, Gaming Wire, Las Vegas Review-Journal, 2-28-04

There is much discussion these days about regulating Internet gaming; the pundits are wont to say that neither the American Congress nor any other governing body can put this genie back into its bottle. That may well be true, but there have been some "pressures" applied, directly and indirectly, that at least in the short-term, will have an impact on Internet gaming; advertising and payment providers are showing the effects of the pressure.

During the course of reporting the story "Ads for Gambling Sites Abound Despite Legal Crackdown on Media" (MediaDailyNews, Jan. 30), MSNBC.com pulled two such ads that appeared on the Covers.com section within its sports channel. MSNBC….The ads' existence was first brought to MSNBC.com's attention by MediaDailyNews. "The bottom line is that sports betting ads are illegal on our site, and we enforced our policy," said Cherylynne Crowther, VP-marketing, MSNBC.com. "Once we realized that we had out-of-policy ads running, we yanked them," she said. MediaDailyNews, 2-2-04

MasterCard International has issued a bulletin to its member financial institutions, reinforcing the importance of compliance with all MasterCard standards aimed at preventing the use of MasterCard systems for any illegal activities. "We're issuing the bulletin to remind our global membership that MasterCard does not tolerate illegal activities of any kind. …illegal activity include Internet payments for transactions involving gambling, pornography, and prescription medications." …a member that fails to comply with these standards to absorb the cost of any illegal transactions, and in addition, MasterCard could assess, suspend or terminate that member. Business Wire, 2-12-04

Slot maker Sierra Design Group this week averted a move by Missouri regulators to revoke its gambling license in that state -- which could have threatened the company's business nationwide -- by shutting down an Internet site that regulators believe offered illegal gambling. The Reno-based company, which is in the process of being acquired by slot giant Alliance Gaming Corp. of Las Vegas, had operated an Internet site under a subsidiary called Arcade Planet. Liz Benston, Las Vegas Sun, 2-12-04

On the other side of the issue, Antigua is attempting to stop the United States from applying such pressure or passing laws against Internet gaming. Antigua is not alone in its belief, the European Union, Canada and Japan have joined in the efforts.

Antigua has taken the US before the World Trade Organization alleging that its hard line on Internet gambling amounts to protectionism. The tiny Caribbean state says that the country's moralistic stance is seriously damaging its economy. … The bulk of the Antiguan economy relies on tourism, but Internet gambling has been a growth sector in recent years. According to a report on Caribbean Net News.com, the country has lost around US$30 million since the US began its attempts to restrict Americans' access to on-line gambling services. Antigua took the matter before the WTO, claiming that these prohibitions are discriminatory and in breach of international trade agreements that require the US to allow foreign Internet companies to offer their services to US citizens. The EU, Canada and Japan are supporting Antigua in the action. …The WTO ruling is expected in about a month. Outlaw.com, 2-2-04

In the meantime, play continues, and surprisingly it is not the single sports-guys of the beer commercials, but women over 40 that may be the real market. And in a not so surprising development, Harrah's is ahead of the gaming industry in recognizing the opportunity and providing a legal interim way to play until, as we must believe Harrah's hopes, actual wagering is legalized. I wonder if Harrah's is supporting Antigua's case?

Think teenagers are spending all night long playing online games on the computer? Wrong -- it's their mothers burning the midnight oil. AOL…released a study on Tuesday showing that U.S. women over the age of 40 spend nearly 50 percent more time each week playing online games than men and are more likely to play online games daily than men or teens. Ben Berkowitz, Rueters, MSNBC, 2-11-04

Harrah's, the US casino giant, is to launch its first Internet gambling site, but with a fresh twist. It's avoiding traditional casino games and is targeting 35-48-year-old women as its main demographic. Also new is a subscription model for the games, which allows punters to win prizes even when they're not playing. The games will be skill-based, rather than casino games. Users will pay subscription fees between £10 and £56 per month for unlimited access to the site. Paul, Online Casino News, 2-10-04

In this changing world, with Internet gaming, racinos, video lottery terminals and other non-casino devices creeping into every neighborhood, maybe the biggest change is just peeping over the horizon: television gaming; poker and sometimes blackjack tournaments are proliferating at the rate of breeding rabbits. The current version does not allow spectators to make a wager, but the technology exists and is already in use by some racing organizations, to make it a wagering event if it becomes legally possible. Lakes is going public with their version, that is about as mainstream as it gets. It took the gaming industry nearly 50 years to become accepted enough to walk the Wall Street.

Lakes Entertainment, Inc. World Poker Tour, LLC announced today that it will seek to raise approximately $20 million through a newly formed corporation pursuant to an underwritten initial public offering of common stock at a price to be determined. It is expected that proceeds from the offering will be used to expand World Poker Tour's entertainment production business and for its working capital. There will be no selling shareholders participating in the offering. Business Wire, Yahoo Business, 2-23-04

Poker on television has become ubiquitous, and discussions of the phenomenon are common, but more importantly so are conversations about the games. If you chance to walk into a restaurant, bar or casino with a game on, chances are that you will hear it being discussed much like an NFL or NBA game and the players' names are becoming as well known as other sports stars. Did you ever hear of Moneymaker?

I've seen some steam over the years, but this TV-gambling thing rates right near the top. People are watching the "World Poker Tour" on the Travel Channel and the "World Series of Poker" on ESPN and they're starting to believe that they can play, too. These shows have created a renaissance of sorts for poker and it won't stop there. Based on the success of the poker programming, video production companies, cable channels, and even the major networks are looking for ways to get in on the rush. Anthony Curtis, Las Vegas Advisor, 2-26-04

What can gaming companies do if they don't go Internet or find a new foreign market (and don't have the patience to wait and see what happens with poker on television)? How about an ethnic but still in-America market? And which is the largest and fastest growing minority in the United States?

Mikohn Gaming Corporation, a leading provider of diversified products and services used in the gaming industry worldwide announced today that it has entered into an agreement with Star Slots International LLC (SSI) for the right to develop a new series of games featuring Hispanic legends such as Julio Iglesias and Celia Cruz. Business Wire, Yahoo Business, 2-18-04

The Castaways would be transformed into Las Vegas' first hotel-casino marketed directly to Hispanics if a trio of small casino operators exercise an option to buy the 49-year-old property. Jeff Simpson, Las Vegas Sun, 2-25-04

As difficult as it might have been to believe just a couple of years ago, television is becoming a major force in the expansion of gaming. Not that it had no role before. Television has been important for a long time in sports betting; we need the scores and the standings (and sometimes we can even get the odds) after all. But legal sports betting was always (unless you count the Oregon lottery, or god forbid, the Internet) limited to Nevada; poker on the other hand is ubiquitous, hanging around in every state and at every level of society. Will the next generation's youth aspire to poker greatness as they aspire to football or basketball greatness? How can they escape it? Lets get out the cards and teach the kids to play; they always buy their parents a home for retirement with the first million, don't they?